An interesting survey was conducted asking specific questions to professionals within the real estate industry in Spain, including estate agents, lawyers, surveyors and mortgage insurance brokers. We wanted to get a general perspective on the market and what property in Spain for sale will look like in the upcoming months.
Here is an overview of some of the questions asked and answers:
What is the current situation of houses for sale in Spain?
Contrary to what people may think, not everything has stopped during the lockdown. Lawyers, in particular, are still concluding deals. Most of the deals they are presently working on started before the lockdown of course, but they are still going ahead. Many property owners are planning to hold on to their assets knowing they may be faced with a prolonged absence of income which under normal circumstances they would be preparing to cash in on high short term summer rentals. However, they feel confident that the market will kick into full force before long and are ready to hold on to their assets rather than give in to a fast sale at a highly discounted price.
How do you visualise the rest of 2020?
There’s no denying that the lockdown of borders impeding tourists to travel to Spain is going to have a considerable impact on the rest of 2020. The duration of closed borders will determine the real impact. On a positive note, should borders re-open by the end of June then the impact will be minimal as it will be business as usual during the top months of the year. There is no denying that Spain’s appeal will remain intact. It’s climate, proximity to Northern Europe is what feeds the property market in Spain, especially in the beachside resorts.
Prices of property are expected to drop because we believe there will be fewer buyers. The type of buyer will also change. In these times, following a world crisis, people will naturally be less comfortable to invest. Those who do are the ones who have the money to take advantage of a buyer’s market. They are financially equipped to buy now at a discounted price and wait for the market to come back to its full strength. At the same time, these savvy investors will be looking for a good deal to make it worth their while. Property owners will be forced to accept lower deals to raise equity.
What is happening at present, during Spain’s lockdown?
The measures taken by the Spanish government to combat COVID-19 have placed buyers, sellers, landlords, tenants, investors, agents, banks and lawyers in an unprecedented situation. Already there have been signs of owners looking for a quick sale but these are proving difficult to close at this stage of the lockdown. Many sales that were pending before the lockdown have now fallen through. At this stage, we are still in the dark as to what banks are planning post-COVID-19. If they make the same mistakes as they did in the last crisis, making it virtually impossible for anyone to borrow, this will further lower the number of buyers and make it more difficult to close deals.
At present statistics show a significant increase in the number of visits to Spanish property websites. Many agents who are communicating with their clients, especially those who planned to come on viewing trips during the lockdown, say their clients are waiting for the day the borders re-open and they can fly over to Spain to buy their second home under the sun.
The real estate market as such is more or less at a standstill, but estate agents are getting overwhelmed with web portal queries. Many want to pre-schedule viewing trips, especially clients from Scandinavia who seem quite confident that they will be visiting Spain this summer and are looking forward to it.
And we are making deals! We even have some who have made offers subject to viewing the property and subject to mortgage approval. These deals are on standby until the borders re-open. This virtual approach is something we are now focussing on to line-up deals for both buyers and sellers.
We would be making more deals, however, the problem right now is that sellers are still hanging on to their price and buyers are expecting mega deals. Here are a few examples:
We had a buyer ready to sign a virtual purchase offer on an apartment listed at 160K. The buyer made an offer for 130K. The owner refused. Another buyer made a 100K offer on an apartment listed for 199K. It was rejected. The owner of a villa listed at 1.6m rejected 950k. Yes, buyers are expecting to take advantage of the situation in these hard times. The question is, whether owners are willing to take the money now and swallow a profit drop or do they prefer to sit and wait until the market comes back to normal?
At present banks are still open for new business and are still approving new mortgage applications subject to a property valuation. Of course, at this point valuers are not visiting homes. However, it means that we can have all the paperwork ready to go with a mortgage pre-agreed subject to the valuation of the property.
According to mortgage providers they don’t see there being a massive credit crunch as was the case in 2008 / 2009, and they suspect the government and central bank will come up with a liquidity plan to ensure banks have enough cash to pump back into the market, as and when needed. They expect interest rates to remain very low given the negative effect COVID-19 is having on global economies.
When do you suspect the Spanish government to re-open its borders?
No one knows for sure, as the government has not made any clear indications as to when borders will re-open. We doubt people will be allowed to come into the country until mid-summer. We think that come July, when people realise that borders aren’t yet opened this will make owners of houses in Spain think twice about hanging onto to their original price. This is when we will get a boom when owners will be more open to accept a deal presented to them right there and then. This shift will cause prices to drop. More buyers will want to snatch-up what excellent deals they can get their hands on now, before borders re-open and prices start to rise once again. It will be an interesting buyer’s market, a short-lived window this summer, that we expect will begin in July.
